oversight

Future Years Defense Program: DOD's 1998 Plan Has Substantial Risk in Execution

Published by the Government Accountability Office on 1997-10-23.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                  United States General Accounting Office

GAO               Report to Congressional Requesters




October 1997
                  FUTURE YEARS
                  DEFENSE PROGRAM
                  DOD’s 1998 Plan Has
                  Substantial Risk in
                  Execution




GAO/NSIAD-98-26
             United States
GAO          General Accounting Office
             Washington, D.C. 20548

             National Security and
             International Affairs Division

             B-277841

             October 23, 1997

             The Honorable John R. Kasich
             Chairman, Committee on the Budget
             House of Representatives

             The Honorable Charles E. Grassley
             The Honorable William V. Roth, Jr.
             United States Senate

             Since its bottom-up review in 1993, the Department of Defense (DOD) has
             repeatedly stated that it must reduce its infrastructure to offset the cost of
             future modern weapon systems. Our analysis of DOD’s Future Years
             Defense Programs (FYDP) for fiscal years 1996 and 1997 showed that DOD
             continued to allocate about the same percentage of its budget for
             infrastructure activities as it did at the time of the bottom-up review and
             that planned weapon systems increases had repeatedly been shifted
             further into the future with each succeeding FYDP.1 As requested, we
             compared DOD’s fiscal year 1998 FYDP with the FYDP for fiscal year 1997.
             Specifically, we determined (1) how major programs were adjusted from
             the 1997 FYDP to the 1998 FYDP and (2) how these adjustments may affect
             programs in the future. We also identified proposed Quadrennial Defense
             Review (QDR) initiatives that could impact future FYDPs. We do not reflect
             any adjustments that may have been taken by the Committees on
             Authorizations and Appropriations during their reviews of the fiscal
             year 1998 defense budget request.


             An objective of DOD’s 1993 Report on the Bottom-Up Review was to
Background   identify potential infrastructure savings and to launch a long-term process
             to reduce and streamline DOD’s infrastructure without harming readiness.
             The report stated that infrastructure activities accounted for $160 billion in
             fiscal year 1994, or about 60 percent of DOD’s total obligational authority.
             DOD defines infrastructure as those activities that provide services to
             mission programs, such as combat forces, and primarily operate from
             fixed locations.

             Our analysis of DOD’s FYDPs and infrastructure activities over the past few
             years showed that the infrastructure portion of DOD’s budget had not

             1
              Future Years Defense Program: Lower Inflation Outlook Was Most Significant Change From 1996 to
             1997 Program (GAO/NSIAD-97-36, Dec. 12, 1996); Defense Infrastructure: Costs Projected to Increase
             Between 1997 and 2001 (GAO/NSIAD-96-174, May 31, 1996); and Future Years Defense Program: 1996
             Program Is Considerably Different From the 1995 Program (GAO/NSIAD-95-213, Sept. 15, 1995).



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                   decreased as DOD planned. As explained in our previous reports, about
                   80 percent of DOD’s infrastructure activities are paid for from the military
                   personnel and operation and maintenance (O&M) accounts. Therefore, if
                   DOD is to free up dollars for weapons modernization, it must reduce
                   funding requirements for these accounts.

                   The FYDP is an authoritative record of current and projected force
                   structure, costs, and personnel levels that have been approved by the
                   Secretary of Defense. The 1997 FYDP supported the President’s fiscal
                   year 1997 budget and included budget estimates for fiscal years 1997-2001.
                   The 1998 FYDP supports the President’s fiscal year 1998 budget and
                   includes budget estimates for fiscal years 1998-2003.

                   In May 1997, DOD completed its first QDR. The QDR was required by the
                   Military Force Structure Review Act, which was included in the National
                   Defense Authorization Act for Fiscal Year 1997 (P.L. 104-201). DOD said
                   that it designed the QDR to be a fundamental and comprehensive
                   examination of America’s defense needs from 1997 to 2015. It considered
                   potential threats, strategy, force structure, readiness posture, military
                   modernization programs, defense infrastructure, and other elements of the
                   defense program. The QDR is intended to provide a blueprint for a
                   strategy-based, balanced, and affordable defense program. DOD plans to
                   incorporate many of the details of the QDR blueprint into its fiscal
                   year 1999 budget and FYDP for fiscal years 1999-2003.


                   Our comparison of the 4 years common to both DOD’s fiscal year 1998 FYDP
Results in Brief   and 1997 FYDP (1998-2001) shows that funding for military personnel; O&M;
                   and research, development, test, and evaluation (RDT&E) is projected to be
                   higher and funding for procurement is projected to be lower than
                   anticipated 1 year ago. For the fourth straight budget year since 1995, DOD
                   has not met its procurement goals established in previous FYDPs.

                   The 1998 FYDP retains substantial risk that DOD’s program will not be
                   executed as planned. Although the 1998 FYDP projects that a smaller
                   percentage of DOD’s total budget will be needed to pay for infrastructure
                   activities than that projected in the 1997 FYDP, DOD’s projections are
                   questionable. For example, the 1998 FYDP projects billions of dollars in
                   savings due to management initiatives, but DOD does not have details on
                   how all the savings will be achieved. Also, DOD projects no real growth in
                   the cost of the Defense Health Program during 1998-2001, whereas O&M
                   funds in DOD’s health program increased 73 percent in real terms during



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                       1985-96. Another reason we believe the 1998 FYDP poses risks is that the
                       estimates for procurement spending, in relation to DOD’s total budget and
                       its O&M projections, run counter to DOD’s experience over the last 30 years.

                       DOD  acknowledged in its May 1997 Report of the Quadrennial Defense
                       Review that the 1998 FYDP includes substantial financial risk. The Secretary
                       has stated that absent any further changes, the fiscal patterns and
                       assumptions embedded in the 1998 FYDP are most likely not going to free
                       up sufficient funds to achieve DOD’s modernization goals. According to
                       DOD, compared to the 1998 FYDP, the QDR proposes a more balanced,
                       modern, and capable defense program that can be achieved within
                       currently proposed budgets. To accomplish its goals, DOD proposes that it
                       reduce personnel, make some modest changes in force structure, realize
                       additional infrastructure savings through fundamental reforms and base
                       realignments and closures, and continue to improve its business
                       operations. The success of these initiatives will require discipline,
                       execution, and aggressive follow-through on the part of DOD management.
                       On some important initiatives, such as base closures and military
                       personnel reductions, DOD will need congressional approval.


                       The 1997 FYDP, which totaled $1,281 billion, represented DOD’s 5-year
The 1998 FYDP          program through fiscal year 2001.2 The 1998 FYDP, which totals
Reflects Some Change   $1,607 billion, covers the 6-year period through fiscal year 2003. The 1997
Since the 1997 FYDP    plan overlaps the 1998 plan for the 4 years 1998-2001. Table 1 compares
                       the two plans, by appropriation.
but Retains
Substantial Risk in
Execution




                       2
                        Unless otherwise stated, the dollar values shown in this report are in current dollars and on a fiscal
                       year basis.



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Table 1: DOD’s 1997 and 1998 FYDPs, by Appropriation
Dollars in billions
                                                                                                                              Total
                                                                    Fiscal year                                            1997         1998
Appropriation                      FYDP            1997     1998     1999      2000      2001       2002      2003        FYDP         FYDP
Military personnel                 FY 1997         $69.8   $69.2     $70.0     $71.1     $73.1                           $353.2
                                   FY 1998                  69.5      70.1      71.4      73.3     $75.3     $77.5                    $437.1
                                   Change                    0.3       0.1        0.3       0.2
Operation and maintenance          FY 1997          89.1    88.6      90.1      92.3      95.9                            456.0
                                   FY 1998                  93.5      91.4      92.0      93.8      91.8      95.2                      557.7
                                   Change                    4.9       1.3      –0.3      –2.1
Procurement                        FY 1997          38.9    45.5      50.5      57.7      60.1                            252.7
                                   FY 1998                  42.6      50.7      57.0      60.7      68.3      68.0                      347.3
                                   Change                   –2.9       0.2      –0.7        0.6
Research, development, test, and   FY 1997          34.7    35.0      33.7      31.9      31.7                            167.0
evaluation
                                   FY 1998                  35.9      35.0      33.4      32.9      34.2      35.8                      207.2
                                   Change                    0.9       1.3        1.5       1.2
Military construction              FY 1997           5.5     4.8       4.7        4.1       4.2                             23.3
                                   FY 1998                   4.8       4.3        4.3       4.2       3.4       3.4                      24.4
                                   Change                       0     –0.4        0.2         0
Family housing                     FY 1997           4.0     3.8       4.1        4.1       4.1                             20.1
                                   FY 1998                   3.8       4.0        3.9       4.0       3.9       4.0                      23.6
                                   Change                       0     –0.1      –0.2      –0.1
Other                              FY 1997           1.9     2.1       1.9        1.4       1.4                              8.7
                                   FY 1998                   2.2       1.7        1.4       1.4       1.2       1.5                       9.4
                                   Change                    0.1      –0.2        0.0       0.0
Total                              FY 1997     $244.0 $249.0 $255.1 $262.5 $270.4                                      $1,281.0
                                   FY 1998                 $252.2 $257.2 $263.5 $270.3 $278.2 $285.3                                $1,606.7
                                   Change                   $3.2      $2.1      $1.0     –$0.1
                                          Note: Program estimates in DOD’s FYDP are expressed in total obligational authority, which is the
                                          sum of the new budget authority provided for a given fiscal year and any other amounts
                                          authorized to be credited to a specific fund or account during that year, including transfers
                                          between funds or accounts. Total obligational authority may not reflect the precise budget
                                          authority adjustments made in the President’s budget. Totals may not add due to rounding.

                                          Source: 1997 and 1998 FYDPs.



                                          Focusing on the years common to both FYDPs, table 1 shows that the costs
                                          of military personnel; O&M; and RDT&E are higher than previously planned,




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                            while planned procurement spending is reduced. Specifically, the 1998
                            FYDP adds about $1 billion to the military personnel accounts, $3.7 billion
                            to O&M accounts, and $4.9 billion to RDT&E accounts and reduces planned
                            procurement spending by $2.8 billion. Increases in the O&M accounts and
                            decreases in the procurement accounts are inverse to DOD’s goals since the
                            bottom-up review, which have been to reduce infrastructure and increase
                            funding for weapons modernization. This is the fourth straight budget year
                            since 1995 that DOD has not met procurement goals established in previous
                            FYDPs.


                            Savings achieved from infrastructure reductions have too often not been
                            as large as anticipated and tended to be absorbed by unplanned or
                            underestimated expenses in day-to-day operations. According to DOD, the
                            most prevalent underestimated expenses are for depot maintenance, real
                            property maintenance, military construction, and medical care. Because of
                            unrealized savings, weapons modernization plans have repeatedly been
                            delayed.

                            Defense budgets are planned to remain relatively flat in inflation-adjusted
                            terms through 2003 as part of the balanced budget agreement. Therefore, if
                            DOD is to achieve real growth in the procurement accounts, it must reduce
                            funding for its infrastructure activities.

                            The 1997 FYDP projected that spending for infrastructure would decline
                            slightly from 58 percent to 57 percent of DOD’s budget during 1998-2001.
                            The 1998 FYDP shows that spending for infrastructure is projected to
                            decline from 58 percent to about 55 percent of DOD’s budget from 1998
                            through 2001 and further decline to 54 percent through 2003. This planned
                            decline in infrastructure spending is predicated primarily on planned
                            reductions in O&M accounts. Our review of these and other accounts and
                            DOD’s own review of the current FYDP found risks that sufficient reductions
                            will not occur and that planned procurement increases will not
                            materialize. We discuss these risks in later sections of this report.


QDR Finds That Program      In the QDR report, the Secretary of Defense expressed doubts that the 1998
Changes Must Be Made to     FYDP goes far enough to break the cycle of the migration of funds from

Mitigate Known Cost Risks   planned procurement to unplanned expenses. Specifically, the report
                            states the following:

                            “Based on an assessment of recent patterns and the assumptions embedded in the current
                            six-year plan, the QDR concluded that there was a potential for annual migration to




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                       unplanned expenses of as much as $10-$12 billion per year in the later years of the plan.
                       Migration in that range would undermine much of the planned increase in procurement.
                       Instead of growing to $60 billion, procurement funding could be expected to stall in the
                       range of $45 to $50 billion. Some growth from the FY 1998 level could be expected from
                       ongoing efforts to reduce the cost of defense infrastructure and from the natural transition
                       of several major programs from development to production. Absent any further changes to
                       the defense program, however, growth above $50 billion would be highly unlikely.”


                       A principal resource management objective of the QDR was to understand
                       the financial risk in DOD’s program plans and devise ways to manage that
                       risk. In the QDR report, the Secretary recognizes the sources of instability
                       that are built into the current FYDP and presents plans to mitigate that
                       instability through more realistic planning assumptions in the 1999 FYDP.
                       Those assumptions include making some force structure reductions and
                       greater personnel reductions, shedding additional excess facilities through
                       more base closures and realignments, streamlining operations, and
                       proceeding more prudently on the acquisitions of new weapons. DOD
                       recognizes in the report that it will need congressional approval to
                       accomplish some of the more significant cost-reduction measures, such as
                       additional base closures and military personnel reductions. In appendix I,
                       we discuss specific QDR proposals that could impact future defense
                       programs.



                       By comparing the 1998 FYDP with the 1997 FYDP, we found that during fiscal
Fiscal Year 1998       years 1998-2001, active duty military personnel and the comparable
Program Provides for   military personnel accounts have net increases of 4,655 personnel and
Small Increase in      $929 million, respectively. The overall increases are due to changes in the
                       active Army. The Army has programmed 10,000 more military personnel by
Active Military        the end of 1998 and an additional 10,000 personnel in 1999 for a total
Personnel              increase of 20,000 from the 1997 FYDP.3 The Air Force and Navy have
                       programmed personnel decreases in every year for the common period,
                       and the Marine Corps’ 1998 personnel remains unchanged from the 1997
                       FYDP.


                       Within the active components, some military personnel programs
                       expected to receive the largest cumulative funding increases during
                       1998-2001 are the Army’s recruit training ($1.8 billion), general skill
                       training ($1.4 billion), and integrated recruit and skill training
                       ($965 million). Some of the largest cumulative decreases in military

                       3
                        According to an Army official, contrary to what the 1998 FYDP shows, the Army will end 1997 with
                       about 490,000 active duty personnel and plans to be down to about 480,000 personnel by the end of
                       1999.



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                     personnel costs are projected for the Navy’s general skill training
                     ($547 million) and the Army’s and Air Force’s defense medical centers,
                     station hospitals, and medical clinics ($249 million and $191 million,
                     respectively). Appendix II provides a description of these and other
                     programs identified in this report.

                     The 1998 FYDP shows that the Navy and Air Force plan to lower active duty
                     force levels in fiscal years 1998-2003 by 3,319 and 6,031, respectively. The
                     planned decreases would bring force levels below the permanent
                     end-strength levels set forth in the National Defense Authorization Act for
                     Fiscal Year 1996. If DOD is precluded from implementing its planned
                     personnel reductions, it will have to make other compensating
                     adjustments to its overall program.


                     Overall, a comparison of the 1998 FYDP with the 1997 FYDP shows an
Risks in Executing   increase of $3.7 billion in O&M funding during 1998-2001. By service, the
O&M Plans            1998 FYDP projections differ considerably from the 1997 projections when
                     comparing dollar values in the common 4-year period. The Air Force’s
                     1998 FYDP projections are higher than the 1997 FYDP projections in every
                     year. Air Force programs that are projected to receive the largest
                     cumulative gains between 1998 and 2001 are base operations for tactical
                     air forces ($904 million), training ($525 million), and F-15A/B/C/D
                     squadrons ($410 million). The Air Force program, logistics operations
                     other than working capital funds, has the largest projected cumulative
                     decrease during the common period—$437 million.

                     The Navy and Marine Corps 1998 FYDP O&M estimates are higher in 1998
                     and 1999, with decreases in 2000 and 2001. The Navy’s largest projected
                     cumulative increases include nonindustrially funded depot maintenance
                     ($564 million) and administrative base operations ($418 million). The
                     Marine Corps’ largest projected cumulative increase is for other combat
                     support ($444 million). The largest cumulative projected decreases are in
                     the Navy’s logistics support activities ($330 million) and in the Marine
                     Corps’ other personnel activities program ($302 million).

                     In contrast, the Army’s 1998 FYDP O&M funds are lower in every year than
                     the 1997 FYDP. Some of the Army’s largest projected cumulative decreases
                     are in real property maintenance ($800 million) and nonindustrially funded
                     depot maintenance ($622 million). Despite lower 1998 FYDP levels, Army
                     base operations increase by $2.3 billion during 1998-2001.




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                              According to the Secretary of Defense, support costs have been
                              consistently underestimated in recent years. In underestimating costs, DOD
                              risks the execution of its program as originally desired. The following
                              sections describe significant influences on the O&M accounts.


Operational Changes in        Part of the higher 1998 O&M level in the 1998 FYDP is due to DOD’s request
Bosnia Could Lead to          for almost $1.5 billion for Bosnia operations.4 In July 1997, we reported
Higher O&M Costs              that recent operational decisions will increase the cost estimate for 1998
                              and that other decisions, such as changes in the size and composition of
                              the force and the timing of withdrawal, could lead to further increases in
                              the O&M cost estimate for 1998.5


Large Projected Savings in    DOD  is depending on a number of management initiatives, both defined and
O&M Dependent on              undefined, to achieve large savings in future O&M costs. For example,
Management Initiatives        undefined savings of $600 million in 2001 were included in the 1998 FYDP.
                              These savings were not in the 1997 FYDP. Moreover, additional savings of
                              $4.2 billion and $3 billion are projected in 2002 and 2003, respectively.
                              According to DOD officials, the savings were programmed by the Office of
                              the Secretary of Defense, although details do not exist on how the savings
                              will be achieved. In addition to these savings to be generated through
                              undefined initiatives, DOD has programmed over $16 billion in savings from
                              defined initiatives. These include outsourcing installation support,
                              improving maintenance processes, improving material management
                              processes, consolidating inventory control points, and reducing the
                              life-cycle costs of weapon systems by reducing the operation and support
                              costs for fielded and new systems.


Base Closure Savings Have     In reporting on lessons learned from prior base closure rounds, we noted
Been Difficult to Precisely   that costs associated with closing bases can be significant; savings, though
Estimate                      not well documented, are expected to be substantial; and achieving annual
                              recurring savings to offset costs may take several years.6 However, the
                              exact amount of actual savings realized from base closure actions is
                              uncertain.



                              4
                               The 1997 FYDP did not include any funds for Bosnia beyond fiscal year 1997.
                              5
                               Bosnia: Cost Estimating Has Improved, but Operational Changes Will Affect Current Estimates
                              (GAO/NSIAD-97-183, July 28, 1997).
                              6
                               Military Bases: Lessons Learned From Prior Base Closure Rounds (GAO/NSIAD-97-151, July 25, 1997).



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                           In the 1997 FYDP, the Air Force was the only service that projected savings
                           from the fourth round of base closures. The savings was projected at
                           $586 million during 1998-2001. The 1998 FYDP projects total Air Force
                           savings of $119 million for these 4 years, $467 million less than the 1997
                           FYDP. Moreover, the savings slip to 1999-2001. The 1998 FYDP also includes
                           projected savings for the Navy from the fourth round of base closures.
                           However, the Navy’s projected savings in the FYDP of $687 million in 2000
                           and 2001 is incorrect. According to the Navy, this estimate is for
                           outsourcing and competition initiatives. Instead, base closure savings
                           projections should show $1.3 billion for 1998-99, with steady state annual
                           savings of $732 million thereafter.


Estimates for Lower        The Defense Health Program, approximately 11 percent of projected
Health Care Costs May Be   annual O&M spending, changes considerably from the 1997 FYDP to the 1998
                           FYDP. When compared with the 1997 FYDP, the 1998 FYDP shows lower
Unrealistic
                           funding levels between 1998 and 2001. Figure 1 shows funding levels for
                           the Defense Health Program for the entire period covering the 1997 and
                           1998 FYDPs.




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Figure 1: Defense Health Program Funding for the 1997 and 1998 FYDPs

Dollars in billions
11.5




  11




10.5




 10




 9.5
       1995           1996   1997        1998           1999           2000           2001           2002           2003
                                                     Fiscal year

                                              1997 FYDP 1998 FYDP


                                        Source: DOD FYDP data.




                                        DOD significantly underbudgeted the 1997 O&M Defense Health Program,
                                        and Congress appropriated additional funds for the program. Shortfalls
                                        continue in the 1998 FYDP in fiscal years 1998 and 1999, as documented by
                                        DOD in the 1998 President’s budget submission. Moreover, when the
                                        program in the 1998 FYDP is viewed in constant dollars, DOD projects no
                                        growth between fiscal year 1998 and 2001.7 This appears to be unrealistic,
                                        given that during fiscal years 1985-96, O&M funds in DOD’s health program
                                        increased 73 percent in real terms. In addition, our analysis of the Defense
                                        Health Program during the 1998 FYDP development showed that one key
                                        assumption DOD used to estimate future program costs appeared to be
                                        unrealistic and another was questionable.8 Although DOD’s budget

                                        7
                                         The 1997 FYDP had 5.8 percent real growth between fiscal year 1998 and 2001.
                                        8
                                         Defense Health Program: Future Costs Are Likely to Be Greater Than Estimated
                                        (GAO/NSIAD-97-83BR, Feb. 21, 1997).



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                                  assumptions appear to be optimistic, the extent to which future costs
                                  might exceed the budget estimates is unknown.


Civilian Personnel Levels         Civilian personnel levels have a direct effect on O&M costs because
Are Projected to Decline          civilians’ salaries and benefits account for about 40 percent of annual O&M
Steadily                          appropriations.9 Overall, civilian personnel levels continue downward at
                                  nearly the same rate in the common period in both FYDPs. In the 1997 FYDP,
                                  the total number of civilian personnel was projected to decline 6.2 percent
                                  between fiscal year 1998 and 2001. During the same period in the 1998
                                  FYDP, the number of civilians is projected to decrease at a rate of
                                  6.6 percent.


                                  The 1998 FYDP reflects a net decline in planned procurement during the
Risks That                        4 years common to the 1997 FYDP. The largest decline is in 1998, for which
Procurement Plans                 the President’s budget requested $42.6 billion in lieu of the $45.5 billion
May Not Succeed                   projected in last year’s FYDP. Projected spending declined by 10 percent or
                                  more over the common years for some major programs, including the
                                  Advanced Tactical Fighter, Abrams tank upgrade, Bradley base
                                  sustainment, Javelin and Hellfire missiles, UH-60 Blackhawk and SH-60
                                  helicopters, Medium Launch Space Vehicle, Joint Standoff Weapon, and
                                  Global Positioning System.

                                  Both the 1997 and 1998 FYDPs anticipate procurement spending of
                                  $60 billion in 2001. The 1998 FYDP projects that procurement costs will
                                  increase to about $68 billion for 2002 and remain at that level for 2003.

                                  The 1998 FYDP procurement accounts include funds reserved for
                                  modernization that were not included in the 1997 FYDP. These funds total
                                  $19.8 billion for 1999-2003. Table 2 shows the allocation of these funds by
                                  year.

Table 2: Proposed Modernization
Reserve, by Fiscal Year           Dollars in millions
                                                         FY 1999          FY 2000          FY 2001         FY 2002          FY 2003
                                  Reserve                    $965           $1,783          $2,454           $6,640           $8,003
                                  Source: 1998 FYDP.




                                  9
                                   Approximately 87 percent of DOD civilian payroll costs are paid from O&M appropriations. The
                                  remainder is funded from the RDT&E, military construction, and family housing appropriation
                                  accounts.



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                                         DOD has programmed the funds in anticipation that savings will be
                                         achieved from reduced operating costs and that the savings will become
                                         available for procurement. However, DOD has not assigned these projected
                                         funds to specific programs.

                                         With each FYDP from fiscal year 1995 to 1997, DOD has not met its plans to
                                         increase procurement. There is risk that DOD’s 1998 plan also may not
                                         succeed. Since 1965, O&M spending has increased consistently with
                                         increases in procurement spending. However, the 1998 FYDP shows that
                                         DOD plans to change that historical relationship from 1998 through 2003 by
                                         increasing procurement while decreasing O&M spending. Figure 2 shows
                                         the historical and projected relationship between O&M and procurement
                                         spending.



Figure 2: Historical and Projected Relationship Between Procurement and O&M Spending in Constant 1998 Dollars

Dollars in billions
140


120


100


 80


 60


 40


 20
      1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003
                                                   Fiscal year

                                            O&M Procurement Projected




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                                         DOD’s plans for procurement spending in the 1998 FYDP also run counter to
                                         another historical trend. Specifically, DOD procurement spending rises and
                                         falls in nearly direct proportion to movements in its total budget. However,
                                         DOD projects that procurement funding will rise in real terms during
                                         1998-2003 by about 43 percent while the total DOD budget remains
                                         relatively flat. Figure 3 shows the historical trend and DOD’s FYDP
                                         projections.



Figure 3: Historical and Projected Relationship Between Procurement Spending and DOD’s Total Budget in Constant 1998
Dollars

Dollars in billions
450

400

350

300

250

200

150

100

 50

   0
   1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003
                                                Fiscal year

                                          Total DOD Procurement Projected


                                         DOD’s plans to increase procurement funding to pay for modern weapon
                                         systems will also have to provide for potential cost growth in existing
                                         systems. Program cost increases and schedule delays are two of the
                                         oldest, most prevalent, and most visible problems associated with weapon




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                     systems development and procurement. In 1994, we reported that program
                     cost increases of 20 to 40 percent have been common for major weapon
                     programs, with numerous programs experiencing increases much greater
                     than that.10 A 1993 RAND study of weapon system cost growth prepared
                     for the Air Force concluded that there had been no substantial reduction
                     in the average cost growth of weapon systems over the last 30 years,
                     despite the implementation of several initiatives intended to mitigate the
                     effects of cost risk and the associated cost growth.11

                     We continue to find examples of program projections that appear to be
                     overly optimistic. For example, in our 1997 high-risk report, we noted that
                     the Joint Air-to-Surface Standoff Missile Program contained significant
                     schedule and cost risk.12 The plan is to develop and initially deploy the Air
                     Force’s most capable precision-guided munition in 5 years for no more
                     than $700,000 per missile. However, the plan does not appear to allow
                     enough time to develop and test the munition’s complex technology and to
                     integrate the missile into the appropriate aircraft.

                     In June 1997, we reported that we were skeptical the Air Force could
                     achieve planned production cost reductions of $13 billion proposed in its
                     F-22 fighter aircraft program.13 The planned reductions in F-22 unit costs
                     are greater than achieved in prior fighter programs, and initiatives to
                     reduce the production costs are not fully developed. As a result of the QDR
                     analysis, DOD has decided to reduce total procurement of F-22s by about
                     100 aircraft, in part due to its own overall affordability concerns.


                     Total projected RDT&E funding for the 4 common years increases from
RDT&E Projected to   $132 billion in the 1997 FYDP to $137 billion in the 1998 FYDP—an increase
Increase             of $5 billion. Table 3 shows total planned funding for the seven budget
                     activities of RDT&E during 1998-2001 in both the 1997 and 1998 FYDPs.




                     10
                      Future Years Defense Program: Optimistic Estimates Lead to Billions in Overprogramming
                     (GAO/NSIAD-94-210, July 29, 1994).
                     11
                       An Analysis of Weapon System Cost Growth (RAND, MR-291-AF, 1993).
                     12
                       Defense Weapon Systems Acquisition (GAO/HR-97-6, Feb. 1997).
                     13
                      Tactical Aircraft: Restructuring of the Air Force F-22 Fighter Program (GAO/NSIAD-97-156, June 4,
                     1997).


                     Page 14                                        GAO/NSIAD-98-26 Future Years Defense Program
                                     B-277841




Table 3: Planned Funding for RDT&E
by Budget Activity During the 4      Dollars in millions
Common Years of 1997 and 1998        RDT&E budget activity                       1997 FYDP    1998 FYDP        Change
FYDPs
                                     Basic research                                  $5,167       $4,877         –$290
                                     Applied research                                12,434       12,174          –260
                                     Advanced technology development                 13,896       14,013           117
                                     Demonstration and validation                    17,606       19,045         1,439
                                     Engineering and manufacturing development       29,505       31,276         1,771
                                     RDT&E management support                        11,908       12,397           489
                                     Operational systems development                 41,749       43,497         1,749
                                     Total                                        $132,265      $137,279        $5,014
                                     Source: 1997 and 1998 FYDPs.



                                     As table 3 shows, the $5-billion increase is almost totally allotted to three
                                     budget activities—demonstration and validation, engineering and
                                     manufacturing development, and operational systems development. Two
                                     accounts were reduced slightly over the period—basic and applied
                                     research.

                                     Programs for which funding was significantly increased over the common
                                     years of both FYDPs include the Joint Strike Fighter ($223 million), airborne
                                     laser technology ($307 million), B-1B bomber enhancements
                                     ($114 million), and dual-use applications programs ($120 million).
                                     Programs for which funding was significantly reduced over the common
                                     years of both FYDPs include experimental evaluation of major innovative
                                     technologies ($2.9 billion), defense airborne reconnaissance ($1.7 billion),
                                     advanced military satellite communications ($567 million), and the
                                     advanced technology transition program ($125 million).


                                     The overall funding level for military construction changed little between
Significant Changes in               the 1997 FYDP and the 1998 FYDP during the 4 common years. However, our
Funding for Military                 examination of programs showed several changes. We found significant
Construction                         increases in Army base operations ($391 million), Navy base realignment
                                     and closure activities ($335 million), Marine Corps base operations
Programs                             ($116 million), training base operations ($67 million), logistics base
                                     operations ($51 million), and Army National Guard base operations
                                     ($50 million). We also found significant decreases in Army management
                                     headquarters construction ($713 million), chemical agents and munitions
                                     destruction ($158 million), Air Force base operations for airlift activities




                                     Page 15                               GAO/NSIAD-98-26 Future Years Defense Program
                                      B-277841




                                      ($145 million), Air Force environmental compliance ($122 million), and
                                      Navy environmental compliance ($49 million).


                                      Total funding for family housing decreases by $337 million, or about
Family Housing                        2 percent, for the common years in the 1997 and 1998 FYDPs. The decrease
Improvement and                       is due primarily to reduced funding for improvements and operations
Operations Funds                      costs. Table 4 compares total funding for the common years of the 1997
                                      and 1998 FYDPs for family housing programs.
Projected to Decline
Table 4: Funding for Family Housing
Programs During the 4 Common Years    Dollars in millions
in the 1997 and 1998 FYDPs            Family housing program                    1997 FYDP     1998 FYDP        Change
                                      Maintenance                                    $5,458       $5,556           $98
                                      Operations                                      4,858         4,500         –358
                                      Improvements                                    2,569         2,127         –442
                                      Leasing                                         2,072         2,089           17
                                      New construction                                1,167         1,156          –11
                                      Homeowner’s Assistance                              0          275           275
                                      Debt payments                                    474           458           –16
                                      Construction (planning and design)                  0          100           100
                                      Total                                        $16,598       $16,261         –$337
                                      Source: 1997 and 1998 FYDPs.




                                      DOD generally concurred with a draft of this report. It emphasized that the
Agency Comments                       full implications of the QDR on programs and budgets will not be fully
and Our Evaluation                    expressed until the submission of the fiscal years 1999-2003 defense
                                      program in February 1998. DOD’s comments are included as appendix III.


                                      To determine the major program adjustments in DOD’s fiscal year 1998
Scope and                             FYDP, we interviewed officials in the Office of Under Secretary of Defense
Methodology                           (Comptroller); the Office of Program Analysis and Evaluation; and the
                                      Army, Navy, and Air Force program and budget offices. We examined a
                                      variety of DOD planning and budget documents, including the 1997 and
                                      1998 FYDPs and the QDR report. We also reviewed the President’s fiscal
                                      year 1998 budget submission; our prior reports; and pertinent reports by
                                      the Congressional Budget Office, the Congressional Research Service, and
                                      others.




                                      Page 16                              GAO/NSIAD-98-26 Future Years Defense Program
B-277841




To determine the implications of program changes and underlying
planning assumptions, we discussed the changes with DOD officials.

We compared DOD’s automated data with published documents provided
by DOD. Specifically, we compared total budget estimates, appropriation
totals, military and civilian force levels, force structure levels, and some
specific program information. Based on our comparisons, we were
satisfied that DOD’s automated FYDP data and published data are in
agreement. We did not test DOD’s management controls of the FYDP data.
The FYDP is DOD’s primary source of official program information. It is used
extensively throughout DOD for analytical purposes and for making
programming and budgeting decisions.

Our work was conducted from March through August 1997 in accordance
with generally accepted government auditing standards.


We are providing copies of this report to other appropriate congressional
committees; the Secretaries of Defense, the Air Force, the Army, and the
Navy; and the Director, Office of Management and Budget. We will also
provide copies to others upon request.

If you have any questions concerning this report, please call me on
(202) 512-3504. Major contributors to this report are listed in appendix IV.




Richard Davis
Director, National Security
  Analysis




Page 17                             GAO/NSIAD-98-26 Future Years Defense Program
Contents



Letter                                                                                             1


Appendix I                                                                                        20
                        Smaller Active and Reserve Forces Are Planned                             20
Quadrennial Defense     Proposed Reductions in Operation and Maintenance                          20
Review Initiatives      Proposals Impacting Procurement                                           21
                        QDR Proposes Substantial Investments in Research,                         22
                          Development, Test, and Evaluation

Appendix II                                                                                       24
                        Military Personnel                                                        24
Program Descriptions    Operation and Maintenance                                                 25
                        Research, Development, Test, and Evaluation                               27
                        Military Construction                                                     28
                        Family Housing                                                            29

Appendix III                                                                                      31

Comments From the
Department of
Defense
Appendix IV                                                                                       32

Major Contributors to
This Report
Related GAO Products                                                                              36


Tables                  Table 1: DOD’s 1997 and 1998 FYDPs, by Appropriation                       4
                        Table 2: Proposed Modernization Reserve, by Fiscal Year                   11
                        Table 3: Planned Funding for RDT&E by Budget Activity During              15
                          the 4 Common Years of 1997 and 1998 FYDPs
                        Table 4: Funding for Family Housing Programs During the 4                 16
                          Common Years in the 1997 and 1998 FYDPs
                        Table I.1: QDR Proposed Military Personnel Reductions                     20

Figures                 Figure 1: Defense Health Program Funding for the 1997 and 1998            10
                          FYDPs




                        Page 18                          GAO/NSIAD-98-26 Future Years Defense Program
Contents




Figure 2: Historical and Projected Relationship Between                    12
  Procurement and O&M Spending in Constant 1998 Dollars
Figure 3: Historical and Projected Relationship Between                    13
  Procurement Spending and DOD’s Total Budget in Constant 1998
  Dollars




Abbreviations

DOD        Department of Defense
FYDP       Future Years Defense Program
O&M        operation and maintenance
QDR        Quadrennial Defense Review
RDT&E      research, development, test, and evaluation
THAAD      Theater High Altitude Area Defense


Page 19                           GAO/NSIAD-98-26 Future Years Defense Program
Appendix I

Quadrennial Defense Review Initiatives


                                       The following sections describe proposed Quadrennial Defense Review
                                       (QDR) initiatives that could impact the Department of Defense’s (DOD)
                                       future programs.


                                       Across DOD, QDR actions are to reduce active military end strength by about
Smaller Active and                     62,000 and Reserve end strength by about 54,000. The reductions, by
Reserve Forces Are                     service, are shown in table I.1.
Planned
Table I.1: QDR Proposed Military
Personnel Reductions                   Service                               Active military                 Reserves
                                       Air Force                                     26,900                        700
                                       Army                                          15,000                     45,000
                                       Marine Corps                                   1,800                      4,200
                                       Navy                                          18,000                      4,100
                                       Total                                         61,700                     54,000
                                       Source: QDR report.



                                       According to the QDR, most of DOD’s infrastructure is in the military
                                       departments (medical and some logistics functions are the exceptions). In
                                       fiscal year 1997, the military departments’ infrastructure activities employ
                                       557,000 military personnel. Further, the QDR states that about 37,000 of the
                                       active military positions would be eliminated from infrastructure
                                       activities.


                                       According to DOD, 61 percent of the people employed by the Department in
Proposed Reductions                    fiscal year 1997 are involved in infrastructure activities. Most of these
in Operation and                       activities, including civilian pay, are funded from the operation and
Maintenance                            maintenance (O&M) appropriation. Since the end of the Cold War, DOD has
                                       reduced its military force structure and number of military personnel
                                       faster than its supporting infrastructure. To close the gap, and to begin to
                                       reduce the share of the defense budget devoted to infrastructure, the QDR
                                       proposed the following four actions:

                                   •   Reduce the number of civilian personnel associated with infrastructure by
                                       72,000 more than the reductions in DOD’s 1998 budget.
                                   •   Request authority for two additional rounds of base closures and
                                       realignments.




                                       Page 20                             GAO/NSIAD-98-26 Future Years Defense Program
                          Appendix I
                          Quadrennial Defense Review Initiatives




                      •   Improve the efficiency and performance of DOD support activities by
                          adopting innovative business practices of the private sector.
                      •   Consider far more nonwarfighting DOD support functions as candidates for
                          outsourcing, inviting commercial companies to compete with the public
                          sector to undertake certain support functions.


                          As DOD observed in its QDR report, each new defense program since the
Proposals Impacting       bottom-up review has had to postpone the previous year’s plan to increase
Procurement               procurement spending. According to DOD, these postponements have
                          generally reflected the high priority DOD attaches to current spending on
                          readiness. Funding originally planned for procurement was spent instead
                          to meet day-to-day operating expenses. DOD refers to this as a “migration”
                          of funding. DOD pointed out that funds have migrated because it has not
                          managed financial risk to reflect the importance it also attaches to
                          investing in the future. The implication for the future is that DOD’s
                          operating costs will continue to exceed program estimates, resulting in
                          substantial unrealized weapons procurements early in the next century.
                          DOD recognizes the challenge it faces to achieve its modernization goals.


                          To address the problem of migrating funds, DOD plans to redirect about
                          $6 billion to $7 billion in resources annually by the end of 2003 from
                          savings made available by reducing the force structure, streamlining
                          infrastructure, and adjusting modernization plans. While DOD has retained
                          its goal of increasing procurement funding to roughly $60 billion by fiscal
                          year 2001, it plans to moderate the intermediate targets to $49 billion in
                          1999 and $54 billion in 2000. The QDR also suggests reducing some
                          purchases that were planned beyond 2000.

                          Some of the QDR procurement proposals are as follows:

                      •   Reduce purchases of the Joint Surveillance and Target Attack Radar
                          System from 19 to 13 aircraft.
                      •   Decrease the total procurement of F-22 aircraft from 438 to 339 and slow
                          the maximum planned annual production rate from 48 to 36.
                      •   Reduce the maximum production rate of F/A-18E/F aircraft from 60 to 48
                          per year. Also delay by 2 years, from 2000 to 2002, production at the
                          maximum rate.
                      •   Reduce planned purchases of the Joint Strike Fighter from 2,978 to 2,852.
                          Also delay production at the planned maximum rate for 2 years, from 2010
                          to 2012.




                          Page 21                                  GAO/NSIAD-98-26 Future Years Defense Program
                         Appendix I
                         Quadrennial Defense Review Initiatives




                     •   Reduce planned purchases of the Marine Corps V-22 Osprey from 425 to
                         360 aircraft and accelerate procurement to a long-term rate of 30 per year
                         by 2004.
                     •   Limit procurement of B-2 bombers to the currently planned 21.
                     •   Create a funding reserve to offset cost growth in weapons programs due to
                         technical risk. Cost growth in existing programs divert modernization
                         funds.


                         The QDR discusses broad efforts that are underway in all of the military
QDR Proposes             departments to exploit the Revolution in Military Affairs. Underwriting
Substantial              DOD’s extensive modernization effort and the Revolution in Military Affairs

Investments in           are plans for substantial future investments in research, development, test,
                         and evaluation (RDT&E). DOD acknowledges that some of these major
Research,                investments, while deemed essential to meet national goals, will involve
Development, Test,       very high financial and technological risks. Therefore, it is likely that
                         billions of additional dollars will be directed to these programs over the
and Evaluation           coming years. But according to DOD, the precise amount and allocation of
                         these dollars are still under review. Some of these programs were
                         identified in the QDR report and include the following:

                     •   Theater Ballistic Missile Defense Programs. According to DOD, the Theater
                         High Altitude Area Defense (THAAD) Program is expected to take longer
                         and cost more than the 1998 Future Years Defense Program (FYDP)
                         anticipated. DOD has decided to slow the Army’s portion of the THAAD
                         program because of serious technical problems and shift the deployment
                         date from 2004 to 2006. According to DOD, this action will improve the
                         stability of the program and lower program risk.
                     •   National Missile Defense. This high-priority program with the executive
                         branch and Congress is on an accelerated research and development path.
                         However, the QDR analysis concluded that this program could not be
                         deployed by the planned date of 2000 within the current program budget.
                         As a result, DOD decided it will direct additional funds to national missile
                         defense. DOD acknowledges in the QDR report that even with the additional
                         funding, this program will remain a high risk.
                     •   Cruise Missile Defense. According to DOD, intelligence estimates have
                         revealed that a cruise missile threat to U.S. forces may emerge after 2000.
                         Therefore, over the next several years, DOD plans to increase emphasis on
                         a national cruise missile defense.
                     •   Navigation. Upgrades to the space-based Global Positioning System and
                         compliance with global air traffic management rules to become effective
                         over the next several years will require significant future expenditures,



                         Page 22                                  GAO/NSIAD-98-26 Future Years Defense Program
    Appendix I
    Quadrennial Defense Review Initiatives




    which are yet to be determined. According to DOD, its very large fleet of
    aircraft will need to be properly equipped with new navigation equipment
    to comply with new procedures of the Federal Aviation Administration
    and the International Civil Aviation Organization.
•   Counterproliferation. DOD said that it will increase planned spending on
    counterproliferation by approximately $1 billion over the 1999 FYDP,
    particularly for protective measures against chemical weapons.
•   Force Protection and Combating Terrorism. According to the QDR, DOD is
    increasing its research and development funding in this area. The funding
    will support state-of-the-art programs, including systems to detect, assess,
    and disable large vehicle bombs; standoff explosive detection capabilities;
    capabilities to maintain surveillance of and tag and track harmful materials
    that can be used in terrorist attacks; and improvements to robotic vehicles
    used in counterterrorism operations.
•   Information Operations. According to DOD, technical measures to protect
    military information systems, in both hardware and software, are being
    greatly expanded.




    Page 23                                  GAO/NSIAD-98-26 Future Years Defense Program
Appendix II

Program Descriptions


                           The following are descriptions of the programs in the FYDP, by
                           appropriation, that are mentioned in this report.



Military Personnel

Recruit Training Units     This program includes staff authorizations, peculiar and support
                           equipment, necessary facilities, and the associated costs specifically
                           identified and measurable to the conduct of recruit training and the basic
                           introductory and indoctrination provided to enlisted entrants in units
                           devoted to such training at Army training centers, recruit training
                           commands, Marine Corps recruit depots, the Air Force Military Training
                           Center, and other DOD facilities.


General Skill Training     This program includes staff authorizations, peculiar and support
                           equipment, necessary facilities, and the associated costs specifically
                           identified and measurable to the conduct of specialized skill training in
                           both DOD and civilian institutions, including initial skill, skill progression,
                           and functional training to provide tactical, technical, administrative, and
                           management skills. Specifically includes, but is not limited to, officer basic
                           courses, advanced individual training at Army training centers, training in
                           aircraft maintenance and airfield operations, formal noncommissioned
                           officer and drill sergeant schools, survival training, Navy apprenticeship
                           training, and temporary duty specifically identified for this training.


Integrated Recruit and     This program includes staff authorizations, peculiar and support
Skill Training             equipment, necessary facilities, and the associated costs specifically
                           identified and measurable to the conduct of enlisted recruit training and
                           initial skill training in a single unit in a single, uninterrupted formal course.
                           Includes, for example, Army one-station unit training and Navy
                           apprenticeship training, when conducted as a single, uninterrupted course
                           with recruit training.


Defense Medical Centers,   This program includes staff authorizations, peculiar and support
Station Hospitals, and     equipment, necessary facilities, and the associated costs specifically
Medical Clinics            identified and measurable to the provision of health care in the continental
                           United States in DOD-owned and operated facilities that are staffed and




                           Page 24                               GAO/NSIAD-98-26 Future Years Defense Program
                         Appendix II
                         Program Descriptions




                         equipped to provide inpatient care for both surgical and nonsurgical
                         conditions and outpatient care for patients that are not hospitalized.



Operation and
Maintenance

Base Operations          This program includes staff authorizations, peculiar and support
                         equipment, necessary facilities, and the associated costs specifically
                         identified and measurable to the following: administration, retail supply
                         operations, maintenance of installation equipment, other base services,
                         bachelor housing operations and furnishings, and other personnel support.
                         Excluded from this program are the following types of base operating
                         support: real property services, minor construction, maintenance and
                         repair, base communications, commissary operations, station hospitals,
                         medical and dental clinics, and family housing.


Air Force Training       This program includes staff authorizations, peculiar and support
                         equipment, necessary facilities, and the associated costs specifically
                         identified and measurable to the operating cost of aircraft used in training,
                         field maintenance, organizational maintenance, and permanent party
                         student authorizations.


Air Force F-15A/B/C/D    This program includes all F-15 acquisitions, research and development,
Squadrons                staff authorizations, peculiar and support equipment, necessary facilities,
                         and the associated costs specifically identified and measurable to the
                         F-15A/B/C/D, including wing headquarters, tactical fighter squadrons,
                         avionics maintenance, field maintenance, consolidated aircraft
                         maintenance, munitions maintenance, and weapon system security.


Air Force Logistics      This program includes staff authorizations, necessary facilities, and
Operations, Other Than   associated costs specifically identified and measurable to the costs of
Working Capital Funds    civilian personnel, travel, and transportation for supply depot operations;
                         inventory control and materiel management-related requirements
                         computations; commodity management; standardization; cataloging;
                         systems and data management; procurement and contract administration;




                         Page 25                             GAO/NSIAD-98-26 Future Years Defense Program
                         Appendix II
                         Program Descriptions




                         requisition processing; inventory accounting; and the management,
                         receipt, storage preservation, issue, and distribution of supplies.


Nonindustrially Funded   This program includes, for all services, funds for reimbursement of the
Depot Maintenance        industrial fund for depot maintenance of aircraft and equipment, financing
                         commercial depot maintenance contracts, and interservice depot
                         maintenance. Also includes staff, equipment, facilities, and associated
                         costs directly measurable to nonindustrially funded depot-level
                         maintenance at various facilities.


Marine Corps Other       This program includes staff authorizations, peculiar and support
Combat Support           equipment, necessary facilities, and associated costs specifically identified
                         and measurable to headquarters of Marine amphibious forces, brigades,
                         and units; communications battalions; force reconnaissance companies;
                         air and naval gunfire liaison companies; and topographic platoons.


Navy Logistics Support   This program includes staff authorizations and the associated costs
Activities               specifically identified and measurable to the following: centrally managed
                         logistics support services not directly related to another program,
                         production engineering activities that do not fit into another program, and
                         various other activities.


Marine Corps Other       This program includes staff authorizations, peculiar and support
Personnel Activities     equipment, necessary facilities, and the associated costs specifically
                         identified and measurable to resources associated with units and activities
                         devoted to enhancing the service’s overall morale, fostering good
                         community relations, and providing miscellaneous personnel support
                         services.


Army Real Property       This program includes staff authorizations, peculiar and support
Maintenance and Repair   equipment, necessary facilities, and the associated costs specifically
                         identified and measurable to maintenance and repair of real property, such
                         as utilities, buildings, other facilities, pavements, land, and grounds.
                         Includes such things as repair of electrical circuitry, heating and air
                         conditioning, water piping, and routine maintenance work, such as
                         caulking and painting, at fixed installations.




                         Page 26                             GAO/NSIAD-98-26 Future Years Defense Program
                              Appendix II
                              Program Descriptions




Research,
Development, Test,
and Evaluation

Joint Strike Fighter (Joint   This program continues engineering and manufacturing development of a
Advanced Strike               joint program to develop a high-technology, low-cost, multirole fighter
Technology)                   aircraft for the Air Force, Navy, and Marine Corps.

Airborne Laser Technology     This program includes funds to design, build, and test a weapon system to
                              acquire, track, and kill theater ballistic missiles in the boost phase.


Air Force B-1B Bomber         This program includes funds for the full-scale engineering development of
Enhancements                  a strategic multirole bomber that maximizes range, payload, and the ability
                              to perform the missions of a conventional bomber, cruise missile launch
                              platform, and nuclear weapons delivery system in both the tactical and
                              strategic role.


Dual-Use Applications         The objective of this program is to leverage emerging dual-use (potentially
Programs                      usable in both commercial and defense applications) technologies to the
                              direct benefit of military system acquisitions.


Experimental Evaluation       This program includes resources to demonstrate technology of major
of Major Innovative           program efforts. Principally, it includes technology investigations aimed at
Technologies                  providing radically new options for major increases in the effectiveness of
                              strategic and tactical command, control, and communications mission
                              areas.


Defense Airborne              This program includes staff authorizations, peculiar and support
Reconnaissance                equipment, necessary facilities, and the associated costs specifically
                              identified and measurable to providing a central focus for a multiservice
                              requirements approach to develop and field future airborne
                              reconnaissance systems.


Advanced Military Satellite   This program includes demonstration and validation efforts to support
Communications                development of the follow-on satellite to the Milstar II program. This



                              Page 27                            GAO/NSIAD-98-26 Future Years Defense Program
                            Appendix II
                            Program Descriptions




                            system will provide the capability for survivable, jam-resistant, worldwide,
                            secure communications for strategic and tactical warfighters.


Advanced Technology         This program includes funds for advanced technology development, which
Transition Program          provides a formal mechanism to foster and encourage transition of the
                            most promising technological opportunities into development programs.



Military Construction

Navy Base Realignment       This program includes resources necessary to implement base
and Closure Activities      realignments and closures. Includes costs to prepare facilities and
                            property for disposal, relocate personnel and equipment, construct new
                            facilities for realigned forces, and assist affected communities. Financing
                            for this program is to be provided by the sale of assets made available by
                            base realignments and closures, and by appropriated funding.


Base Operations             This program includes staff authorizations, peculiar and support
                            equipment, necessary facilities, and the associated costs specifically
                            identified and measurable to the following: administration, retail supply
                            operations, maintenance of installation equipment, bachelor housing
                            operations and furnishings, other base services, and other personnel
                            support. Excluded from this program are the following types of base
                            operating support: real property services, minor construction,
                            maintenance and repair, base communications, commissary operations,
                            station hospitals, medical and dental clinics, and family housing.


Army Management             This program includes staff authorizations, peculiar and support
Headquarters-Construction   equipment, necessary facilities, and the associated costs specifically
                            identified and measurable to management resources for the Headquarters,
                            U.S. Army Corps of Engineers.


Chemical Agents and         This program includes resources, not otherwise provided for, that are
Munitions Destruction       necessary for the destruction of the U.S. stockpile of lethal chemical
                            agents and munitions in accordance with the provisions of section 1412 of
                            the 1986 DOD Authorization Act, Public Law 99-145.




                            Page 28                             GAO/NSIAD-98-26 Future Years Defense Program
                           Appendix II
                           Program Descriptions




Environmental Compliance   This program includes actions to achieve and maintain full and sustained
                           compliance with federal, state, and local environmental laws and
                           regulations; executive orders; and host nation regulations and DOD
                           policies. This program funds all costs related to environmental
                           compliance, including recurring costs of environmental program
                           management; nonrecurring costs of projects/services required to bring DOD
                           into compliance with environmental standards or notice of violation; pest
                           management programs to meet federal standards for pest management
                           and pesticide storage, handling, or use; overseas cleanup and compliance
                           efforts; and certification of innovative technology for DOD applications.



Family Housing

Maintenance                This program includes maintenance costs for the DOD Family Housing
                           Program.


Operations                 This program includes costs specifically identifiable and measurable to
                           operations costs for the DOD Family Housing Program.


Improvements               This program includes costs specifically identifiable and measurable to
                           construction costs, including applicable planning costs, for improving
                           existing facilities under the DOD Family Housing Program and other
                           construction items.


Leasing                    This program includes costs specifically identifiable and measurable to
                           administration and leasing costs of the Leased Housing Program.


New Construction           This program includes costs specifically identifiable and measurable to the
                           construction of new family dwelling units; new trailer court facilities; new
                           nondwelling buildings; new community facilities; and new roads,
                           driveways, walks, and utilities primarily for use by family housing
                           occupants.




                           Page 29                            GAO/NSIAD-98-26 Future Years Defense Program
                            Appendix II
                            Program Descriptions




Homeowner’s Assistance      This program includes costs specifically identified with the Defense
                            Homeowner’s Assistance Fund. These include reimbursements to
                            homeowners for losses in private sales; operating and maintenance costs
                            for acquired properties; appraisal fees; administrative costs for all types of
                            assistance; and equity payments to homeowners, payments in foreclosure
                            cases, and payments on assumed mortgages.


Debt Payments               This program includes costs specifically identifiable and measurable to
                            debt payments for family housing.


Construction Planning and   This program includes staff authorizations, peculiar and support
Design                      equipment, necessary facilities, and the associated costs specifically
                            identified and measurable to the planning and design of military
                            construction, access roads, and minor land acquisitions.




                            Page 30                             GAO/NSIAD-98-26 Future Years Defense Program
Appendix III

Comments From the Department of Defense




               Page 31    GAO/NSIAD-98-26 Future Years Defense Program
Appendix IV

Major Contributors to This Report


                        Robert Pelletier
National Security and   William Crocker
International Affairs   Deborah Colantonio
Division, Washington,   Alan Byroade
                        Shawn Bates
D.C.                    Nancy Ragsdale




                        Page 32              GAO/NSIAD-98-26 Future Years Defense Program
Page 33   GAO/NSIAD-98-26 Future Years Defense Program
Page 34   GAO/NSIAD-98-26 Future Years Defense Program
Page 35   GAO/NSIAD-98-26 Future Years Defense Program
Related GAO Products


              Bosnia: Cost Estimating Has Improved, but Operational Changes Will
              Affect Current Estimates (GAO/NSIAD-97-183, July 28, 1997).

              Military Bases: Lessons Learned From Prior Base Closure Rounds
              (GAO/NSIAD-97-151, July 25, 1997).

              Tactical Aircraft: Restructuring of the Air Force F-22 Fighter Program
              (GAO/NSIAD-97-156, June 4, 1997).

              Defense Budget: Observations on Infrastructure Activities (GAO/NSIAD-97-127,
              Apr. 4, 1997).

              High-Risk Series: Defense Weapon Systems Acquisition (GAO/HR-97-6,
              Feb. 1997).

              Defense Health Program: Future Costs Are Likely to Be Greater Than
              Estimated (GAO/NSIAD-97-83BR, Feb. 21, 1997).

              Future Years Defense Program: Lower Inflation Outlook Was Most
              Significant Change From 1996 to 1997 Program (GAO/NSIAD-97-36, Dec. 12,
              1996).

              Defense Infrastructure: Costs Projected to Increase Between 1997 and
              2001 (GAO/NSIAD-96-174, May 31, 1996).

              Defense Infrastructure: Budget Estimates for 1996-2001 Offer Little
              Savings for Modernization (GAO/NSIAD-96-131, Apr. 4, 1996).

              Future Years Defense Program: 1996 Program Is Considerably Different
              From the 1995 Program (GAO/NSIAD-95-213, Sept. 15, 1995).

              DOD Budget: Selected Categories of Planned Funding for Fiscal Years
              1995-99 (GAO/NSIAD-95-92, Feb. 17, 1995).

              Future Years Defense Program: Optimistic Estimates Lead to Billions in
              Overprogramming (GAO/NSIAD-94-210, July 29, 1994).




(701101)      Page 36                            GAO/NSIAD-98-26 Future Years Defense Program
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